The Sensex gained 215 points or 1.25 per cent to close at 17,413, while the Nifty index advanced 67 points to 5,283. The rupee also traded higher against the dollar.
Reliance Industries ended near the day high, rising nearly 6 per cent. It was the top gainer on the 50-share Nifty index and also the top Sensex mover contributing over 90 index points to the BSE benchmark.
RIL’s outperformance gave a strong push to other energy stocks. The BSE oil and gas index gained over 3 per cent, more than any other group of stocks today.
"The decision on KG-D6 capex approval is likely to come. This will be good news especially if there is a positive outcome... the stock price will go up," Choksey added.
39 of the 50 stocks closed higher on the Nifty index. India's biggest commercial vehicle manufacturer Tata Motors and infra and cement major Jaiprakash Associates jumped 3-4 per cent.
Oil refiner BPCL, which is adversely affected by rising crude prices, was the top Nifty loser, falling nearly 2.5 per cent. Drug maker Dr Reddy's and IT major TCS ended with 0.5-1 per cent losses.
The market breadth was strong with nearly 66 per cent stocks rising on the broader BSE 500 index.
Despite strong gains, analysts were skeptical about the durability of this rally.
"This is a case of liquidity driving the markets worldwide. Given the backdrop in earnings, monsoon, rupee-dollar equation, and spike in crude oil prices... it does not augur well for our markets," Gaurang Shah of Geojit BNP Paribas told NDTV Profit.
Global stocks were supported by a strong job growth in the US. South Korea's Kospi and Japan's Nikkei index ended with over 2 per cent gains. Markets in Europe also traded with small gains.